Britain's car industry got a £2.65bn boost yesterday as Nissan and McLaren
announced plans for new cars and the government guaranteed loans to Ford to
produce a new generation of eco-friendly engines.

Nissan is spending £420m on new production lines at its plant in Sunderland, after choosing Britain to manufacture the world's first mass-produced electric car for the European market.

Production of the Nissan Leaf will begin in 2013 when around 50,000 vehicles a year will start rolling off the production line.

F1 team McLaren is returning to the consumer car market with a £750m budget to launch the MP4-12C supercar and unspecified future models, while Ford's plans involve a five-year, £1.5bn project to develop cleaner burning engines (see boxes, right).

Nissan's move, which will safeguard an estimated 2,250 jobs in Sunderland and across Nissan's UK supply chain, is backed by a £20.7m UK government grant and a proposed finance package from the European Investment Bank of up to £197m.

The news was yesterday warmly welcomed by Business Secretary Lord Mandelson, who described it as "a fantastic vote of confidence in the Sunderland plant and its excellent workforce".

He added: "The automotive sector is of key importance to the UK. It supports R&D, technological innovation, skills and a supply chain that's a mainstay of the wider manufacturing sector.

"Today's news from Nissan, with support from Government, shows that by working together we can achieve our aim of making the UK a world-leader in ultra-low carbon vehicles."

But the UK will not be the first country to make the Leaf. Production of the revolutionary electric hatchback will begin first in Oppama, Japan, later this year followed by a US plant in Smyrna, Tennessee, in 2012.

Meanwhile, construction of an advanced lithium-ion battery plant at Sunderland, plans for which were announced last year, will begin next month.

The battery facility will have a production capacity of 60,000 units a year and will start manufacturing batteries in 2012 for both Nissan and its Alliance partner Renault.

Andy Palmer, senior vice president at Nissan, added: "The world is at the dawn of a new era in automotive transport.

"Nissan LEAF, which will go on sale later this year, is a five-seater hatchback that offers the same space, practicality and performance of a similar car in its class – minus the tailpipe emissions.

"Thanks to the UK's firm commitment to a low carbon future in terms of infrastructure, customer incentives and educational programmes, Nissan Leaf will be built at Sunderland, making the UK the third country in the world to produce this revolutionary car."

The manufacturer with most to lose from the Leaf's launch is Nissan's Japanese rival Toyota, whose Prius model has dominated the eco-aware driver market for the last decade.

Until now, the electric cars on the market have had neither the speed nor the range to present it with serious competition. And that remains an impediment, according to Steve Fowler, editor of What Car? magazine.

"The big issue with electric cars is 'range anxiety'," he said. "Most do around 100 miles on a full charge and the average driver does 28 miles a day so the Prius will always have an advantage because it can do hundreds of miles on one fill up."

Another big barrier to the growth of the electric car market has been the paucity of charging points but an agreement between Nissan and Regional Development Agency One North East includes the development of a regional network of charging points.

Nissan has also agreed to supply foreign-produced Nissan Leafs to the region from early 2011 and sales will be promoted by a range of incentives for early adopters of EVs (Electric Vehicles), such as a period of free charging and the use of dedicated EV lanes.

A Nissan spokesman added: "The charging infrastructure is being developed all the time, spearheaded by the Government's national 'Plugged in Places' scheme, a £30m initiative to install a charging network in up to 6 'trailblazing' cities.

"It's true there is more work to do ahead of Leaf's introduction, but this is a situation that's improving. We're confident there will be sufficient charging points – together with home charging – for Leaf to succeed in the UK from launch."

Electric driving will certainly be cheap. Nissan estimates the running costs of the Leaf at €2 per 100km.